Second-quarter profits at JPMorgan Chase (JPM) surged due to a one-time accounting boost and a Wall Street revival, but another drop in a key revenue source demonstrated the challenges facing even the biggest US bank.
Net income of $18 billion was up 25% from the same period a year ago thanks largely to an exchange of shares in credit card giant Visa (V) that provided roughly $8 billion in gains. Excluding those gains, JPMorgan earned $13.1 billion in the quarter.
Its investment banking results beat analyst expectations as fees from that business rose 50% from last year and 17% from the previous quarter, to $2.35 billion. Mergers and acquisitions revenue surged to $785 million, its highest mark since the third quarter of 2022.
Those numbers bode well for other big institutions with sizable investment banking operations, such as Goldman Sachs (GS) and Morgan Stanley (MS).
But there were also new signs of how even JPMorgan is struggling to maintain its outsized performance during an extended stretch of high interest rates, elevated deposit costs and weak loan demand.
A key measure of lending profit known as net interest income fell for the second consecutive sequential quarter, by 1%.
JPMorgan, however, is holding to its full-year net interest income forecast of $91 billion, excluding trading revenue. That would amount to a 2% increase from the net interest income it raked in last year.
JPMorgan’s stock fell by more than 1% in pre-market trading.
JPMorgan CEO Jamie Dimon said “while market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks,” referencing geopolitical tensions and persistent inflationary forces.
“Inflation and interest rates may stay higher than the market expects,” he said.
The result from JPMorgan kicked off another earnings season for the US banking industry as lenders set out to prove that they are staying resilient in the face of uncertainty about the US economy, the path of monetary policy and the unknown outcome of this fall’s presidential election.
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